What Is Leverage? (And Why It Is Your Only Path To Significant Wealth Online)

One of the aspects I enjoy the most about doing interviews with successful entrepreneurs, is feeding my own curiosity to find out things like –

How they attract traffic

How they make money

What a typical day in their life is like

…and so on.

Knowing the answers to these questions can help you with your own business. I find it also helps you to figure out what you personally want to do – what roles you want to perform in your business – since you learn what other people are good at how they derive value from it.

However I have to say the number one thing I am always the most curious about when hearing other entrepreneur stories, is determining how they get leverage.

This is especially true when interviewing millionaires. There are always clear points of difference between someone who makes $100,000 a year online and someone who makes a million dollars.

Discovering what these points of difference are can help you take the leap to the next step.

I believe the most powerful thing you can do to keep your business growing, is learn what a person at the next level up from you did to get there. What do they have, or do, that you do not, or have not done… yet.

Leverage Is Not Always The Same

As part of my EJ Insider interviews club I write a monthly action plan. To create the action plan I re-listen to the two exclusive interviews released that month and attempt to extract the key point of leverage from each person interviewed.

For example in month one, million dollar bloggers Alborz Fallah and Mitch Wilson feature, and in month two it is millionaire email marketers Terry Dean and Jeff Walker.

Each of these four men have created businesses that, thanks to massive leverage, turn over millions of dollars.

However what is interesting is figuring out the one specific thing that gives them leverage. It is not always the same thing.

There are subtle differences in how a person puts the pieces together to create leverage. Even between two guys who both use the same business model online and technically both have the same leverage point, they don’t create the leverage the same way.

It’s discovering the differences and how people do things, and then deciding which ideas to apply to your own business to create your own leverage, that makes learning from other entrepreneurs such a powerful technique.

What Is Leverage?

the enhanced power available to a large company (the supermarket chains have greater leverage than single-outlet enterprises)

US word for gearing

the use made by a company of its limited assets to guarantee the substantial loans required to finance its business

Point three really sums up what I believe leverage is: A strategic advantage.

The advantage is what gives you leverage. It’s why you can provide the same services or product as someone else, yet make so much more money.

During my early days studying business at university I came across the term leverage many times.

Unfortunately when you hear about leverage in an academic environment as a student, it often feels very abstract.

You study case studies of large companies and learn about things like supply chain management, product manufacturing and human resources. It all seems very distant from where you are at that point in your life.

When I went through university the Internet was only just starting to have major impact on business. Needless to say, since then the Internet has revolutionised what forms of leverage are available to companies.

By the end of university, I really didn’t understand leverage, or at least leverage that I could personally apply to my life or any business I might start.

Once I had my own business, experience taught me a lot about leverage, as did concepts like the 80/20 Rule. Yet despite my growing knowledge I still felt I hadn’t truly been able to apply it.

My bank balance was indicative of this, I hadn’t exactly become rich.

It Finally Comes Together

I remember clearly the day when I felt I finally understood how people became millionaires thanks to the internet.

By this stage I had enjoyed success with my card game website and my proofreading business, but I was only making an average living, having not cracked the $100,000 a year level. I was definitely counting my pennies.

I recall one afternoon I was in Melbourne visiting an old highschool friend. This friend was by now well and truly a corporate employee, having gone the traditional path from university to salaried worker.

I wasn’t jealous of his employment, but he was earning more per year than I was. He was very focused on the corporate ladder he was just starting to climb.

I had spent the time since graduating university working a casual job and playing with different projects online. I was in that place where you are unsure of how exactly you are going to sort out your financial future (especially as an entrepreneur), as most people under 25 know really well.

However, in the last year or so I had focused a lot of time on my education. Ironically enough, it was after university that I finally started to like studying, perhaps not surprisingly because I got to choose what I studied.

Outside of book study, I also was beginning my training in the world of direct response marketing, in particular online marketing. I was studying email marketing, learning about squeeze pages, sales copy and watching people like Corey Rudl, Terry Dean and Perry Marshall apply their craft.

With all the repeat exposure to stories and case studies of successful online entrepreneurs, I started to notice patterns.

What was particularly reassuring, was that these people didn’t do anything incredibly special, or at least they were not any more gifted than other people. They applied what they enjoyed, had a little bit of good timing and then when something took off, kept climbing the mountain as fast as they could.

If you are in business, you sell something. Every success story is about a product or service, that was a constant.

For me however, the real ah-hah moment came when I discovered what really made the difference.

Every big success story had some kind of leverage aspect to it. That leverage point always resulted in increased distribution of whatever was being sold or offered.

The big money came from the ability to access lots of people. How each of the businesses went about reaching lots of people and what leverage points they used were different, but the pattern was there. Have a great product or service and figure out how to get it into the hands of plenty of people.

Deciding My Leverage Model

While studying all these different stories I was naturally reflecting on the work required to make each one successful. I did this to determine what role I specifically wanted to perform in my business.

At the time I concluded that the information marketing business was for me. Being an introvert I liked the idea of working from my laptop, writing content and getting paid for my information or for recommending other quality products and services.

The point of realisation came for me, when I realised I could find my point of leverage and reach enough people to start making the kind of money I wanted.

It all became clear. I needed some way to gain distribution and since I was following the information marketing model, my main goal was to increase my subscriber base.

I had a plan, I knew what I had to do and for the very first time I felt like I had the knowledge and the direction to create a business that would make the kind of money I wanted, doing activities I enjoyed.

What is worth exploring now is how different people and different companies create leverage online. How do they create a strategic advantage and gain access to the kind of distribution that leads to big results.

How People Create Leverage Online

Having interviewed and talked to hundreds of online entrepreneurs – and being naturally curious – I have a fairly strong understanding of what methods people use to gain leverage.

Let’s take a look at some…

Search Traffic And Content

Bloggers and content website owners leverage search engine traffic. Google Search, for millions of businesses online, is the leverage point. It gives them a point of distribution that is low friction but can deliver literally millions of potential buyers per month.

Of course the downside is if you rely on Google for leverage, they can take it away with one tweak of their algorithm.

While search traffic might be a point of leverage, as the net has become more crowded, how you go about creating quality content has become a source of leverage too (more targeted content = more traffic). A team of quality journalists or writers can be a strategic advantage.

Paid Traffic

Paid traffic is another huge source of leverage online. Google AdWords was the first big player that introduced the power of buying per click ads, but before this people were buying traffic from banners and other paid for media for years.

Today there are so many options, including Facebook Ads, LinkedIn Ads, Advertising Networks, Native Content Ads (ads that appear like content), Solo Ads (email newsletter advertising), sponsored reviews, and even older formats like text links and banners are still going strong.

The leverage point is the massive amounts of traffic you can access if you have the skill to turn that traffic into profit. The potential downside is the massive cost, so if things don’t work, you lose money.

Affiliates

Affiliates are one of the best sources of leverage, one I have used myself in the past. Affiliates don’t cost money unless they make you money. They can be a huge source of traffic, if you have a system that converts, so they profit and continue to promote.

Today big affiliate networks like Commission Junction offer options like Pay Per Lead, or Pay Per Action, which for sophisticated companies can be a great source of new customers. As with advertising, if you don’t have the system to make money from the traffic, you lose. Get this right though and you have a big source of leverage and scale.

Innovation

Innovation that leads to viral distribution is a common source of leverage online.

Many of the biggest social media companies have leveraged technology to offer services that bring people together to create value. Often that value comes from network effects, which act like a walled garden stopping other companies from replicating what they do.

This is a competitive advantage and since your users become promoters of what you offer, the distribution potential is huge. The leverage in this should be quite obvious.

Facebook, Twitter, LinkedIn and Tumblr, and thousands of other online success stories big and small, take advantage of technology combined with community to create leverage. For more on this read about the “Many To Many” business model.

Other Sources Of Leverage

I’ve covered some of the biggest leverage points online today, but there are other ways to gain leverage that are not so focused on online distribution methods.

For example, premium product at premium pricing can be a point of leverage too.

In this case, quality and branding play a big part. Prestige products like Rolex, Louis Vuitton and Aston Martin maintain leverage through brand perception. They leverage history, craftsmanship and positioning strategies (like associating their products with celebrities and movies) to create a strategic advantage based more on selling at a high price than significant distribution.

Loyalty programs can be a form of leverage, controlling the supply chain to keep costs down can be (think Walmart), and even individual people can be a point of leverage. Steve Jobs at Apple was a big company example of individual leverage, but also many authors and consultants use their personal reputation and past history as a way to create leverage (strategic advantage).

The internet, because of the low friction for distribution, often results in leverage coming from reaching a lot of people for little cost. Communication is quick, global and if you have the right message can lead to massive profits, even if you are just an individual sitting at home on your laptop.

What About Your Leverage Points?

To conclude I will leave you with what points of leverage I have personally implemented. These are the techniques I applied to go from that point in my life I talked about at the start of this article, when I was just enjoying self sufficiency online, to making over a million dollars.

Like many bloggers, Google was my first point of leverage, which allowed me to take a blog started as an experiment and create a steady source of traffic. I then convinced some of those people to join my email newsletter, which gave me an even better source of distribution.

The real difference however came from when I did my first product launch. Thanks to affiliates and releasing significant free content, I reached many more people.

Of course if it wasn’t for the blog to begin with, I wouldn’t have been able to create this source of leverage as no people would have known who I was or supported me. There definitely is a success ladder to climb when it comes to increasing how much leverage you have.

I suggest that you look over what you are doing today and ascertain how you will gain a strategic advantage. In particular, review how you will create significant distribution for what you are selling.

I suspect if you read this blog, you are currently a blogger yourself, or an information marketer. That means your potential to make the leap to the next income level relies on you reaching a certain number of people, to sell a certain number of product, or return income from advertising.

How can you tap into a leverage source that gives you massive distribution?

23 Comments

To tell the truth I am still in the stage of searching for my leverage point. I remember when you interviewed with Mr. Andre Chaperon of Autoresponder Madness. You effortlessly pulled his true leverage points to light and exposed them so that we clearly saw where the majority of his success derived from. If I remember correctly, he used his large email list to his advantage and had an audience anxious to hear his story-telling angle every time. It wasn’t simply the way he wrote his emails but the leverage he used to sky rocket his success, especially as an affiliate marketer. A perfect example of selling the same product as someone else but making SO much more money!

I continue to learn so much from your blogging career and this is another for my toolbox. Great work, keep it coming Yaro!

Leverage is a result. The tool is the lever. A lever allows you to achieve great leverage by exerting small force. Great levers make greater leverage, as does greater force.

There are essentially two ways to get leverage: find a lever, or build a lever. Building one requires effort and investment. Therefore I would look for the levers I already have. What is it that gives me great results with little effort? There’s another word for that, I believe, and it is “talent”. A “strategic advantage” is merely the concept of talent translated from a personal to a business context, but it is quite right.

Most people will focus on the leverage, i.e. the expected result. Therefore they may err and invest a lot of effort to achieve that result. In the beginning look for levers at your disposal, which you are not using. What is it you are good at? And the answer may often be too obvious: talent often obscures itself because it is so obvious to the owner that (s)he may not realize other people don’t have it.

Think of past events where people admired what you did and you thought “heck, that’s nothing”. That’s talent at work. That may be a lever.

This is just one angle at the concept. In order to further accelerate, one probably has to invest some effort into building levers, or amplifiers of first easy success.

I’ve been reading a bit of Seth Godin’s Tribes. He has a great section on “Crowbars”. It’s a really great section. It basically says that levers just got a lot longer. One person can create a video that reaches 50 million people, and that the status quo is in trouble. He says –

“What I’m saying is that one person – okay, what I really mean is you – has everything. Everything you need to build something far bigger than yourself.”

We all have leverage, or we can all create leverage. We just got to do it. I’m sure if we keep trying we’ll find it.

Great post!!
Although we did talk about the leverage concept during our interview the other day, it was interesting that you brought up the “offline” leveraging methods which are obviously very important. Particularly with the Steve Jobs example, I think both Apple and Steve Jobs are iconic brands themselves but by feeding off each other and working synergistically, it just brought the business to a whole new level.
Thanks for sharing your insights.

You know how you talked about hearing all those great ideas at university, yet it all seemed too abstract? You didn’t know how to apply it to your own life? That’s how I feel after reading this post (sorry Yaro, haha).

After reading your email and coming to check out this post, I was excited — and I still am, a little — but I just finished reading the whole post and I still feel lost. I still have no idea how to take this abstract “leverage” idea and bring it home.

Don’t despair, everyone feels lost when they haven’t locked in a direction that motivates them and delivers some kind of positive feedback.

The leverage points I talk about here can be applied to what you are doing, they are not necessarily the answer to what you can do. You need to know what you sell, what you stand for, what you teach or offer, then you can apply leveraged models to that.

The knives site might be a good place to dig further to see if you can expand and produce more profit. Making the first sales is the hardest.

However I strongly suggest you review your personal strengths first to see how best you can leverage yourself. There’s no point working hard on a site to sell knives if you are really only in it for the money. You have to enjoy some part of the process.

This is a great content. For me, the greatest leverage in business is a mind fed with proper business knowledge. Understanding this has guided me to invest more in myself and it is helping me build a great business from scratch with very limited resources.

Haha Nino, thank you. I’m glad something I have written so recently has struck a cord. It’s nice to know I am still current

I like having articles like this to link back to whenever I talk about key terms. That’s why I’ve been writing so many posts about important concepts like Pillar Articles, Theory Of Constraints, Social Proof and Leverage – all very critical stuff.